The Chhattisgarh High Court has affirmed that allegations of financial fraud embedded in commercial transactions cannot be summarily dismissed as purely civil disputes at the threshold. Where cyber complaints raise serious questions of invoice manipulation, routing of payments through multiple accounts, and possible misappropriation, the investigating agency must be permitted to conduct a preliminary inquiry without judicial interference.
Background & Facts
The Dispute
The petitioner, Shaban Ali, operates a coal trading and transportation business and maintains bank accounts with State Bank of India (Sipat Branch) and Bank of Baroda (Rajkisore Nagar Branch). On 22.07.2025, he issued tax invoices in favour of M/s Shree Tathagata Traders for supply of slack coal, with payment terms stipulating full payment before dispatch. Respondent No.7, Shri Anshul Ghodheswar, made partial payments on 22.07.2025 and 23.07.2025 via UPI, IMPS, and NEFT. Despite receipt of partial payment, Respondent No.7 demanded dispatch of coal, contrary to the invoice terms. On 25.07.2025, Respondent No.7 cancelled the order via WhatsApp without clearing the outstanding balance.
Key Facts
- The petitioner received payments aggregating Rs. 12.5 lakhs across multiple bank accounts as directed by Respondent No.7
- Respondent No.7 alleged that the petitioner failed to provide mandatory Transport Permits (TP) required for lawful coal transportation
- The petitioner’s invoices were alleged to be inconsistent with actual documents provided, with material terms such as "terms of delivery" allegedly manipulated
- Respondent No.7 lodged two cyber complaints on the National Cyber Crime Reporting Portal on 28.07.2025 (Acknowledgement Nos. 33307250020284 and 33307250020280)
- The complaints alleged fraudulent inducement, fabrication of documents, and misappropriation of funds under Section 420 IPC and relevant provisions of the IT Act
- The petitioner’s bank accounts were placed under lien/debit hold by Respondents No.5 and 6 following communications from police authorities
- A First Information Report (NCR No. 0127/2025) was registered on 29.07.2025 by Police Station Gudiyari, Raipur
- A legal demand notice was issued by Respondent No.7 on 05.08.2025 seeking recovery of alleged overpayments
Procedural History
- 22.07.2025: Tax invoices issued by petitioner in favour of Respondent No.7
- 22.07.2025 & 23.07.2025: Partial payments made by Respondent No.7 via digital channels
- 25.07.2025: Order cancelled by Respondent No.7 via WhatsApp
- 28.07.2025: Cyber complaints registered on National Cyber Crime Reporting Portal
- 29.07.2025: NCR No. 0127/2025 registered at Police Station Gudiyari, Raipur
- 08.08.2025: Communication issued to banks placing lien on petitioner’s accounts
- 08.08.2025: Respondent No.3 (ICCC Bilaspur) submitted affidavit before CJM denying issuance of communication
- 10.08.2025: Banks informed CJM that lien was placed pursuant to communication from Respondent No.3
- 15.08.2025: Petitioner filed application before CJM, Bilaspur seeking defreezing of accounts
- 25.08.2025: CJM dismissed the application
- 10.09.2025: Revision petition dismissed by Sessions Court
- 28.03.2026: Writ Petition (WPCR No. 162 of 2026) filed before Chhattisgarh High Court
The Parties' Positions
Petitioner: Claims the dispute is purely civil, arising from breach of contract and non-payment. Alleges Respondent No.7 maliciously invoked cyber crime machinery to exert pressure. Denies fabrication of documents and asserts all transactions were legitimate.
Respondents (Union, State, Police, Banks, and Complainant): Contend that the petitioner engaged in fraudulent conduct by routing payments through multiple accounts, submitting inconsistent invoices, and failing to provide statutory documents. Assert that the cyber complaints disclosed cognizable offences warranting investigation.
Relief Sought
The petitioner seeks:
- Quashing of Cyber Crime Complaint Acknowledgements Nos. 33307250020284 and 33307250020280 dated 28.07.2025
- Withdrawal of communication issued to banks by Respondent No.3
- Immediate removal of lien/debit hold on bank accounts
- Restraint on further coercive action
- Costs of the petition
The Legal Issue
Can a cyber complaint registered under the National Cyber Crime Reporting Portal, alleging financial fraud in a commercial transaction, be quashed at the threshold on the ground that the dispute is purely civil, before any preliminary inquiry is completed?
Arguments Presented
For the Petitioner
The petitioner’s counsel relied on Mitesh Kumar J. Shah v. State of Karnataka, 2021 INSC 675, to argue that criminal proceedings arising from purely civil disputes constitute abuse of process. It was contended that the allegations relate to breach of contract and non-payment, which are remediable through civil courts. The freezing of bank accounts without judicial order was termed arbitrary and violative of Articles 14, 19(1)(g), and 300A. The contradictory statements by Respondent No.3 were cited as evidence of procedural arbitrariness.
For the Respondent
The State and Union contended that the complaints disclosed prima facie elements of cheating, fraud, and misappropriation under Sections 420 IPC and Section 66 of the IT Act. The preliminary inquiry was a lawful investigative step to preserve evidence and prevent dissipation of funds. The communication for the lien was issued by Respondent No.4 (Gudiyari PS), not Respondent No.3, and any initial misattribution by banks was corrected. The petitioner had already exhausted alternative remedies before the CJM and Revisional Court. The matter required factual adjudication, which cannot be undertaken in writ jurisdiction.
The Court's Analysis
The Court examined the nature of the allegations and found that they transcended a simple contractual dispute. The complainant alleged that the petitioner deliberately routed payments through multiple bank accounts, submitted inconsistent invoices, and failed to provide mandatory Transport Permits despite receiving substantial sums. These allegations, if true, suggest a pattern of deception designed to extract funds under false pretences.
"It is apparent from the record that respondent No.7 has levelled specific and serious allegations alleging fraudulent conduct on the part of the petitioner, including inducement to transfer substantial amounts through banking channels, insistence on routing payments through multiple accounts, and failure to honour the contractual obligations despite receipt of consideration."
The Court emphasized that the role of the investigating agency at the preliminary stage is not to conclusively determine guilt, but to ascertain whether the complaint discloses a cognizable offence. The Court cited settled principles that where financial transactions involve allegations of fraud, the investigating authorities must be afforded latitude to conduct a preliminary inquiry.
"In matters involving financial transactions, particularly where allegations of fraud or misappropriation are under examination, it is a settled practice for the investigating agency to take protective steps so as to maintain status quo with respect to the disputed funds."
The Court rejected the petitioner’s argument that the dispute was purely civil, noting that the fabrication of documents and manipulation of invoice terms raised questions of criminal intent. The Court also found that the discrepancy regarding the issuing authority of the bank communication was a factual dispute best resolved during investigation, not in writ proceedings.
The Court further held that the petitioner had already availed remedies before the CJM and Revisional Court, and had failed to secure relief. The extraordinary jurisdiction under Article 226 cannot be invoked to circumvent these remedies, particularly when the matter is at a nascent investigative stage.
The Verdict
The writ petition was dismissed. The Court held that the preliminary inquiry initiated by the police must proceed without interference. The lien/debit hold on the petitioner’s bank accounts shall remain in place until the conclusion of the investigation. The investigating authorities are directed to conclude the inquiry expeditiously, within a period of 12 weeks from the date of this order. No costs are awarded.
What This Means For Similar Cases
Preliminary Inquiry Is Not a Formality
- Practitioners must recognize that cyber complaints involving financial transactions are not automatically civil, even if they arise from commercial disputes
- Allegations of document fabrication, routing payments through multiple accounts, or inconsistent invoicing may trigger criminal investigation even before FIR registration
- The threshold for initiating preliminary inquiry is low; it requires only prima facie disclosure of elements of fraud or cheating
Bank Freezes Are Not Per Se Illegal
- Temporary lien on bank accounts during preliminary inquiry is a recognized precautionary measure
- Such action does not require a court order if issued by competent police authority during investigation
- Banks acting in compliance with such communications are not liable for damages unless malice is proven
Writ Jurisdiction Cannot Substitute Investigation
- Courts will not interfere in ongoing investigations unless there is clear abuse of process or mala fide intent
- Petitioners must exhaust alternative remedies before approaching High Courts under Article 226
- Disputed questions of fact - including authenticity of documents and intent of parties - cannot be adjudicated in writ proceedings
